I didn't actually set out to entrepreneur -- I just sort of morphed into one when my friend Cate and I came up with the idea for Urbanista, an online rolodex for girls living in New York City.
Cate and I met when we both moved to the Big Apple after graduating from college in 2004. We soon realized that when a girl sets up shop on an island the size of Manhattan, it's not an easy task to figure out where she's going to go to get her hair cut, her eyebrows shaped, and her jeans hemmed -- let alone where she should take her shoes to get reheeled!
Cate and I thought: "We should create a web site that lists reliable recommendations for stuff like this." So we surveyed all our best pals for tips and published the results on a site that we had whipped up using Blogger, a super easy Web designing tool for total non-techies such as ourselves. We emailed the link to all of our friends -- most of whom were shocked that we had taken our idea as far as we did -- and we assumed our pet-project was complete. Little did we know it was just beginning.
The day of our launch, Gawker linked to our site, and suddenly our page views skyrocketed -- and kept going up, and up, and up. We quickly realized that we had hit upon an untapped niche, and if we rebuilt the site to accommodate advertising, we might be able to achieve Web 2.0's Holy Grail: a money-making enterprise. But in order to hire Web designers to do the construction, we'd need to find financial backers--a task neither of us really knew how to accomplish. What were these two liberal arts majors to do?
I decided to become the professor of my own business 101 class, and web sites such as Entrepreneur, Inc, and Fast Company became my textbooks. After doing some quick cramming, I plotted out a course of action: We'd a) teach ourselves how to write a business plan; b) write a business plan; c) hire a lawyer; d) find investors; e) negotiate a funding deal; f) close the funding deal; and g) hire Web designers to rebuild the site. It was going to be an uphill battle.
I won't bore you with the details, but we were actually able to accomplish h) all of the above within the past year, and now we have a redesigned site that supports advertising and growing traffic. Tons people have asked me what steps they would need to take -- and in what order -- if they wanted to accomplish the same thing that we did. So here's my cheat sheet.
Because it's helpful to have a roadmap that shows where your company is headed, you should draft a business plan. (Plus potential investors will want to see the blueprint for your project.) Some great resources for teaching yourself how to do this are:
*SCORE, a nonprofit geared towards helping small business owners. It provides free templates for business plans and financials (balance sheets, profit and loss projections, cash flow statements, and more).
*American Express's small business section. It gives detailed step-by-step directions for creating a business plan.
*The Wall Street Journal's Start Up Journal. It features a business plan center, complete with free sample documents.
The best advice I got when starting my business was hire a great lawyer who has experience dealing with entrepreneurs. But whether you hire an attorney or handle legal matters yourself, check the following items off of your to-do list:
*Choose a business structure. There are differences between corporations, LLCs, sole proprietorships, and partnerships, and deciding your corporate structure affects the taxes you pay, who can invest in your business, and your financial well being. Entrepreneur has a good section on this, as does the SBA.
* Get a tax ID. You'll need this in order to open up a business bank account. Getting a tax ID involves a simple call to the IRS, so you don't necessarily need a lawyer for this. While you're at it, it's helpful to scan the IRS's small businesses page (paying special attention to the taxes section).
*Trade mark your intellectual property. It can take up to a year to get a trademark, so start this process early!
If you need money in order to fund your business, there are generally two ways to get it: [] equity financing or debt financing. (Check out Inc for more general financing information.)
Most entrepreneurs I've encountered have gone the equity route, giving up ownership in exchange for capital, which they receive from either angel investors or venture capitalists. Here's a good comparison on angels versus VCs. (For more information on angles, read these Inc and Entrepreneur articles). If you go the VC path, click on over to The Funded, which rates VCs. (Note: VCs usually operate in early stage or late stage funding, so do your homework before making your approach.)
Once you've found investors, you'll need to structure a funding deal, which usually involves figuring out how to split equity among your business's founders and investors. One thing I learned is that no matter how much Googling I did, I'd never find a magical answer as to [ how to divide the pie, since determining what sweat equity is worth is usually subjective. One tool that can be used with a little bit of tweaking, however, is the Pie Calculator. And, after you and your investor have agreed on terms, you have to [] close the deal, which is whole separate ball game...